Correlation Between El Al and Amazon

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Can any of the company-specific risk be diversified away by investing in both El Al and Amazon at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining El Al and Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between El Al Israel and Amazon Inc, you can compare the effects of market volatilities on El Al and Amazon and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in El Al with a short position of Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of El Al and Amazon.

Diversification Opportunities for El Al and Amazon

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between ELALF and Amazon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding El Al Israel and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc and El Al is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on El Al Israel are associated (or correlated) with Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of El Al i.e., El Al and Amazon go up and down completely randomly.

Pair Corralation between El Al and Amazon

Assuming the 90 days horizon El Al Israel is expected to generate 5.45 times more return on investment than Amazon. However, El Al is 5.45 times more volatile than Amazon Inc. It trades about 0.21 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.16 per unit of risk. If you would invest  101.00  in El Al Israel on December 30, 2023 and sell it today you would earn a total of  32.00  from holding El Al Israel or generate 31.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

El Al Israel  vs.  Amazon Inc

 Performance 
       Timeline  
El Al Israel 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in El Al Israel are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, El Al reported solid returns over the last few months and may actually be approaching a breakup point.
Amazon Inc 

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Amazon displayed solid returns over the last few months and may actually be approaching a breakup point.

El Al and Amazon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with El Al and Amazon

The main advantage of trading using opposite El Al and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if El Al position performs unexpectedly, Amazon can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Amazon will offset losses from the drop in Amazon's long position.
The idea behind El Al Israel and Amazon Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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